Tag: payments

Despite the prevalence of credit cards and payment services like Venmo and Apple Pay, when things go wrong, cash is still king.

Europe and the UK got a really good reminder of that after a network crash on 1 June prevented millions of Visa credit and debit card holders from making any transactions.

Things got even worse when some MasterCard and American Express cards started getting declined after transactions were rerouted through Visa’s IT network.

All told, this issue created a pretty big headache for a lot of Europeans who found that when trying to buy tickets for a train or bus ride home after work, the cards in the wallets had suddenly reverted to being useless pieces of plastic.

In addition to many gas and railway stations, other major outlets including Mark’s and Spencer’s and Sainsbury’s were unable to accept payments from Visa cards, with The Guardian reporting that after learning about the issue, “some customers were simply dumping their shopping at the tills”.

Apparently people with Visa debit cards were still able to withdraw cash from ATMs.

Visa UK first tweeted out a statement regarding “service disruptions” shortly before 6pm London time, after problems first started around 2:30pm. This was later followed up by an announcement from UK Finance, the trade association that represents payment firms in Britain:

Visa is currently experiencing a service disruption which is preventing some Visa transactions in Europe from being processed. It is investigating the cause and acting as quickly as possible to resolve the situation. Visa is working with banks, building societies, merchant acquirers and card providers to return to a normal service and will provide regular updates.

Meanwhile, MPs are demanding answers from Visa, who were down for half a day after a “hardware failure”.

“A third of all spending in the UK is processed by Visa. It’s deeply worrying, therefore, that such a vital part of the country’s payment infrastructure can fail so catastrophically,” Nicky Morgan, the chairwoman of the Treasury select committee, said.

“The consequences were sudden and severe. Many consumers and businesses were left stranded on Friday, unable to make or accept payments, with chaos reported in shops.”

A committee has been formed, and is seeking answers on a number of issues, including whether or not cardholders or shopkeepers will be entitled to compensation, and what steps Visa will take to prevent a similar system failure in the future.

Sanral may have to restart the legal process from scratch should it want to recover the money it claims it’s owed, or abandon the cases entirely.

Last week, the Organisation Undoing Tax Abuse (Outa) barred roads agency Sanral from pleading 55 cases against its members in court on the grounds that it had not followed court procedures and had delayed presenting its cases in court. These 55 cases represent nearly R2-million in outstanding e-tolls.

What this means is that Sanral may have to restart the legal process from scratch should it want to recover the money it claims it’s owed, or abandon the cases entirely. The roads agency has issued several thousand summonses to collect outstanding e-tolls and has obtained default judgement against some who failed to put up a defence in court. Though Sanral has trumpeted these default judgments as precedent-setting victories, Outa says they are nothing of the sort. They merely mean the defendants failed to show up in court and argue the case.

Outa is defending roughly 150 summonses issued against its members, roughly a third of which it says have now been barred.

Sanral is attempting to recover about R11bn in outstanding e-tolls from Gauteng motorists. Some 3m motorists are reckoned to owe e-tolls, out of 3,5-4m registered motorists in the province.

As usual, Outa and Sanral have entirely different interpretations of the same facts. Says Vusi Mona, Sanral’s GM for communications: “There are no matters in which Sanral has been barred from pleading. There have been ongoing engagements with Outa’s attorneys for agreed timeframes for the exchange of pleadings and there are no operative bars against Sanral.”

Both Sanral and Outa had previously agreed to run a “test case” which would serve as a legal precedent, so as to avoid clogging the courts with thousands of cases. Last month, Outa pulled out of the test case process as this was taking too long to get to court, opting instead to lodge papers in the high court in Pretoria in defence of one of its members, Thandanani Truckers and Hauliers, which outlines its opposition to e-tolls.

“We were aware that while developing the complicated e-toll test case process, Sanral was issuing default judgments and declarations against the general public, in the belief they would be able to secure a precedent-setting case,” says Ben Theron, Outa’s chief operating officer. “One would have thought Sanral would have learnt by now that coercion and intimidation have not worked in the past and will not resolve the entity’s mounting debt.

“As far as Outa is concerned, Sanral’s journey of following an extensive litigation process to collect outstanding debt will take years to unfold and is a significant waste of the courts’ time and taxpayers’ money,” says Theron.

Another potential problem for Sanral is the issue of prescription in terms of the Prescription Act, which makes it difficult for creditors to recover debts older than three years.

Who is going to criminalise 3m motorists? We know what happens to governments who go to war with their own people on issues such as this
E-tolls came into being in December 2013, so any outstanding e-tolls from December 2013 to May 2014 may have to be written off by Sanral. Outa chairman Wayne Duvenage reckons that more than R1bn of the outstanding e-tolls have now prescribed and are therefore unrecoverable by Sanral. And it’s getting worse every day.

Sanral’s Mona takes a different view: “To date, the issue of prescription has not been raised by any defendant in any matter where Sanral has sought payment of outstanding e-tolls. In any event, the failure to pay e-tolls is a criminal offence which is not subject to prescription.”

Sanral is relying on the Administrative Adjudication of Road Traffic Offences (Aarto) Act, which criminalises certain traffic-related offences in the Joburg and Pretoria metropolitan areas.
Wayne Duvenage
A legal expert specialising in prescription told Moneyweb that Sanral is treading on thin ground if it is relying on Aarto to recover its debts. “Sanral’s attempts to recover debts is a civil matter, and the Prescription Act applies. If I was defending clients summonsed by Sanral I would argue this vigorously and have any debt older than three years thrown out. I doubt any court is going to look at this as a criminal matter.

“Another point I would argue is that Sanral is potentially engaging in reckless lending in terms of the National Credit Act, since it is effectively issuing credit without doing the requisite credit assessment, despite the fact that Sanral says it is exempt from the NCA.”

Duvenage says the matter of prescription is likely to be contested by Sanral but any entity attempting to criminalise 3m defaulting motorists through the courts is playing with fire. Who is going to criminalise 3m motorists? We know what happens to governments who go to war with their own people on issues such as this.”

Theron says despite warnings from civil society that the Gauteng e-toll scheme would collapse due to its cumbersome, costly and burdensome administrative processes, Sanral and the department of transport have decided to continue their litigious war against motorists.

Meanwhile, earlier this month, Sanral announced that it had cancelled all future bond auctions pending the outcome of a governmental task team inquiry into road funding. Sanral needs to borrow about R600m/month to cover its interest bill and operations, but the auctions have been poorly supported over the last year. Sanral says it has enough cash to last a few months. Institutional investors and rating agencies are increasingly concerned at the state of governance in state-owned companies, which means the government will be left to pick up the tab.

The South African Post Office (SAPO) has officially joined the scramble to replace Cash Paymaster Services (CPS) as the country’s social grants distributor amid an ongoing crisis over the payment of beneficiaries.

CEO Mark Barnes has submitted an affidavit dated March 13 to the Constitutional Court as part of the Post Office’s application to be admitted as a friend of the court in the Black Sash vs Sassa matter due to be heard on Wednesday.

In the court papers, Barnes states that using the Post Office would “serve the national interest, protect beneficiaries’ information and support government’s ambitions for radical socio-economic transformation”.

Barnes has proposed two alternative systems to solve the crisis, including one that could be implemented within days. However, another long-term plan would need to include CPS.

The South Africa Social Security Agency (Sassa) is under more pressure to find a solution after CPS said it would not be able to pay social grants from April 1 if an agreement is not reached by Thursday.

Read the article here: If there’s no new contract by Thursday, grants may not be paid

Barnes states in the papers that the Post Office had already submitted an emergency backup solution to Sassa on March 1 in case CPS pulled out of the payment of grants to 17 million beneficiaries.

It says it can step in by using an electronic voucher system already used to pay staff employed at the department of public works in the Eastern Cape.

The Post Office said the system can be up and running within days, ruling out the need to extend the CPS contract that expires on March 31.

“Pay points would include SAPO branches as well as the 10 000 locations managed by the current cash-in-transit service provider. Identity documents and identity cards would be checked to ensure that the right people are paid the right grants after comparing to Sassa’s SOCPEN database,” Barnes states in the affidavit.

However, Barnes’ long-term solution that would meet the Sassa requirements would need CPS to assist for a maximum of twelve months as the Post Office prepares to take over.

The Post Office would need CPS to provide the biometric system, personnel that could be retained or replaced over time and cash dispensing machines owned by CPS.

Social Development Minister Bathabile Dlamini has insisted on a biometric system, arguing that it guards against fraud and has saved the fiscus R2bn. She said the system ensures that the right beneficiary is paid the right grant and proves the beneficiary is still alive.

‘State organ should have first preference’

Barnes proposes that the Auditor General monitor the 12-month handover period, with quarterly reports submitted to the court.

Barnes said the Post Office would charge R20 per beneficiary. CPS is currently charging R16.44 per beneficiary, an amount that is expected to increase if a new interim contract is signed.

Barnes argues in the court papers that the Post Office as a state organ should have first preference as a service provider.

“Where an organ of state is able to provide services, it is suggested that such services should first be procured from organs of state prior to the invitation being sent out to the public.

“The procurement of such services from the state-owned entities, where it is possible, is in the national interest and is fiscally prudent,” Barnes states in his affidavit.

However, Sassa and Dlamini have previously argued that the Post Office has only 2 567 outlets that are predominately in urban areas while the current system offers 10 000 outlets, mostly in rural areas. The two also said their norms and standards state that beneficiaries should not travel more than 5km to a pay point.